Dec. 17: This story has been updated to clarify the status of SHS spending by Multnomah County.

Since its rollout in 2021, Metro’s Supportive Housing Services tax has raked in nearly $912 million to help prevent evictions and transition people from homelessness to housing.

But as Metro Council faces pressure to help lower the tax burden for local residents by reducing the SHS tax, social service organizations fear it could backfire. 

More than 65 nonprofits and service providers signed on to a letter sent to Metro Council on December 5, urging the Council not to change the tax rate. The letter also carries more than 200 individual signatures.

Metro, the regional government entity for Multnomah, Clackamas, and Washington Counties, is mulling a reduction to the 1 percent income tax on high earners, largely because the revenue has far outpaced what the tax was projected to bring in. 

It’s one of several changes the agency is considering asking voters to approve. Metro is also considering tweaking the allowable uses for the tax. Currently, SHS dollars fund housing placement, rental vouchers, and wraparound services like health care and addiction treatment, but the tax doesn’t fund housing construction. Metro’s Affordable Housing Bond was implemented to do that, but by the end of this year, all the remaining bond funding will be allocated.

Welcome Home Coalition, a housing justice alliance focused on affordable housing policy, is the lead nonprofit agency behind the letter sent to Metro. Welcome Home Coalition and its partner agencies say they support using SHS revenue to help build more affordable housing.

Expanding the allowable uses of SHS dollars could help speed up housing development, but the letter to Metro warns that slashing the tax rate won’t help the region achieve that. 

“Before reducing the funding for our regional work to increase housing stability, we must be clear on the level of service and affordable housing stock you will be forgoing if Metro moves forward with a tax rate decrease,” the letter reads. 

The SHS tax was implemented in 2021 after voters approved a ballot measure in 2020. The funding gives the greater Portland area a much-needed financial boon to address homelessness. Metro initially estimated the tax would fetch $250 million annually. Instead, it’s brought in about $160 million more than that since it went into effect. Last year, it generated just over $335 million. 

Next year, it may not be the golden goose it's been in past years, as Metro forecasts "slow to no growth in revenue" over the next two years. 

Metro is weighing a handful of modifications to the SHS measure that would ask voters to extend the tax’s lifecycle by another 20 years, include affordable housing as an acceptable expenditure, raise the income thresholds to keep pace with inflation and ensure the tax stays focused on high-income earners, and potentially lower the personal income tax rate from 1 percent to .9 percent, and eventually, to .75 percent.

Retooling the SHS measure could help alleviate some of the public backlash local agencies have received in the past over unspent SHS funds, especially as Portlanders perceive a lack of urgency to reduce visible unsheltered homelessness. 

Marissa Madrigal, Metro’s chief operation officer, said the SHS tax has “suffered from a trust-busting combination of slow-to-start programs and higher than anticipated revenues.” 

“The public has watched hundreds of millions of dollars accrue to government bank accounts, while perceiving little change on the ground to show for it,” Madrigal added.

After Multnomah County was placed on a corrective action plan in 2023 for underspending its SHS funds, the county managed to spend all funds received from Metro last fiscal year, even after receiving millions more than anticipated.

To date, SHS money has helped 6,000 households find homes, helped prevent over 15,000 evictions, and created or maintained almost 1,450 shelter beds, according to Metro’s latest reports.

A policy resolution reviewed by the Metro Council in October says, among other goals, the changes aim to increase efficiency and accountability, and reduce the annual tax burden for Metro residents. That last part has advocates and nonprofits worried.

Currently, residents in Multnomah, Washington, and Clackamas Counties pay 1 percent on annual income that exceeds $125,000. For joint-filers, the threshold is $200,000. The tax applies to the portion of taxable income that exceeds the stated thresholds. For example, an individual who earns $127,000 would pay 1 percent of $2,000, or $20 a year. A married couple earning a combined $250,000 pays $500 for the year.

The 1 percent tax is also charged to businesses with more than $5 million in gross receipts.

In October, the Metro Council directed the agency’s staff to develop a package of policy proposals focused on expanding and stabilizing Metro’s supportive housing services and affordable housing program.  

The Council’s direction was clear that any SHS personal income tax decrease should ensure “adequate resources for services and affordable housing.” Metro Council President Lynn Peterson has also floated a tiered allocation system that would use SHS tax funds for affordable housing, but only when a baseline funding amount for counties is met.

Molly Hogan is Welcome Home Coalition’s executive director. Hogan says with the incoming Trump administration, there’s widespread discussion and concern about potential cuts to social service funding.

“That makes it so important that our local leaders double down to make sure our local revenue streams are robust enough to ensure housing stability for all our neighbors," Hogan told the Mercury. “We support a lot of the changes Metro wants to make with the SHS funds. We support a regional plan that has better standardization so the money is more effective.”

But, Hogan says the idea of shrinking the pot of money when the region has substantial wealth inequality is bad policy.

Based on Metro’s financial projections, lowering the tax rate from 1 percent to .9 percent would reduce the current SHS revenue by an estimated $17.5 per year. Cutting the tax rate to .75 percent would reduce revenue by about $44 million a year. 

“Is it really worth a reduction of $44 million a year in collection to save a household living off of $250k a year $10 a month?” Hogan asks.

Some of the pressure to cut the tax rate is coming from the Portland Metro Chamber (formerly known as the Portland Business Alliance). The Chamber argues the region is losing residents, partly due to the tax burden that comes with living in and around Portland.

Welcome Home Coalition and other advocates dispute that claim, saying data doesn’t support that theory. The Coalition points to a poll conducted by DHM Research for The Oregonian in spring that showed homelessness was the top issue for Portland metro residents. The poll, which had a sample size of 600 people, indicates 55 percent of respondents cited homelessness as their top concern. Only 2 to 3 percent of respondents cited high taxes as a concern.

Data from Oregon’s Office of Economic Analysis shows households with an income of $150,000 or more accounted for the fewest households moving from the greater Portland area to Clark County, Washington. The data suggests those who are leaving the area are lower income families who are likely searching for cheaper housing.

Moreover, Welcome Home Coalition notes the Portland Metro Chamber was actively lobbying the Metro Council to lower the SHS personal income tax rate while simultaneously boosting its coffers by increasing fees for businesses within the Downtown Portland Clean & Safe service district, which the Chamber manages. 

Metro says its agency leaders have spent nearly a year seeking stakeholder input on ways to increase the supply of affordable housing.

“In the process, it became clear that oversight and governance of the supportive housing services system was also a priority,” said Emily Green, a spokesperson for Metro. Green emphasized that the Council has yet to vote on a formal proposal. The agency will soon decide if and when to refer a revised SHS ballot measure to voters.

In a statement provided to the Mercury, Metro says its priority is to urgently create more affordable housing while “stabilizing our supportive housing services system so that it can work as effectively as possible toward the regional goal of making homelessness rare, brief, and nonrecurring.”